Measuring Human Development in Invisible Economies: Challenges Posed by the Large Informal and Remittance Sectors in the Caribbean

Elsie LE FRANC

Professorial Research Fellow, Sir Arthur Lewis Institute of Social and Economic Research, University of the West Indies

Cave Hill

Bridgetown, Barbados

T. + 246 417 4477 F. + 246 424 7291

elefranc@uwichill.edu.bb

Andrew DOWNES

University Director and Professor, Sir Arthur Lewis Institute of Social and Economic Research, University of the West Indies

Cave Hill

Bridgetown, Barbados

T. + 246 417 4476 F. + 246 424 7291

serch@caribsurf.com

ABSTRACT

Measuring Human Development in Invisible Economies: Challenges Posed by the Large Informal and Remittance Sectors in the Caribbean

There is increasing concern in many Caribbean countries that many of the aggregate indicators of social and human development are insufficiently accurate and realistic. Possible explanations of the problem include high levels of selective underreporting, the existence of a large remittance economy and a significant informal (including illegal) sector with inadequately and insufficiently recorded information, and real deficiencies in the quality of the societies’ social institutions. This paper will explore the problem by looking at one of the measures designed to identify the proportion of the population unable to obtain basic conditions of life, and without the resources to gain access to those basic conditions. To this end it will examine the data generated since 1990 by the World Bank–inspired poverty assessment surveys. Special focus will be on Jamaica as it is the only Caribbean country which has conducted annual Surveys of Living Conditions since 1989. In the Caribbean, data collection difficulties have meant that poverty assessments have been almost entirely been based on consumption data. In the aggregate and survey data available, the apparent anomalies and apparent contradictions are troubling, and raise questions about the accuracy and validity of the consumption-based poverty assessments. It is not clear for example, why general declines in GDP per capita and real GDP growth, and fluctuating or falling national mean consumption levels should be accompanied by sharply falling levels of poverty. This paper will examine some of these relationships and suggest that considerably more information and analysis of the household economy, intra-household resource distribution patterns, the economic meaning of some of the consumption expenditures, and the role of income and other resource transfers are needed if this measure of human development is to be more useful and realistic.